I was going to wait till after the G-20 to say anything about the overall trend of the markets, but the trends are looking more and more bearish at the moment. The DOW touched the 50MA and moved dramatically from it and right down through the 200MA. I thought we might get support at the 200MA and another crack at the 50MA before any more moves down (which may still happen yet) but the charts are turning to the downside again quickly.
One thing that I noticed with this move down is that it is not on renewed Euro debt fears but on American debt fears as well as other weak economic numbers. Some headlines this week that I noticed where individual state debts and deficits and their ability to pay. (Some of these states owe more than some countries.) Proof of this is that the USD is down against almost every currency lately which has been a large part responsible for the recent pop in the Euro. If you look at the Euro/Yen the Euro is up significantly less. Although the Euro is reacting somewhat positively to Euro zone countries making drastic cuts to their budgets over the last couple weeks.
We are technically just had the opposite of a 'golden cross'... excuse me for not knowing the term but the 50MA has crossed down through the 100MA and will soon cross through he 200MA as well. It looks like we could test 9500 and possibly 9,000 or so during the summer. I think the dog days of summer will apply here.
Where then it could lead us to a total breakdown in the chart this fall. European debt crisis round 2 as well as deepening concerns about individual US state debt with an economy that still has a consumer in savings mode, high unemployment, and declining tax revenues. Also European nations will start to feel the effects on the economies on the harsh cuts they have made. I am betting that yes the market is applauding these cuts, which have to be made, but with adverse effects on all of these high debt nations. These Euro nations will feel the pinch.
Once these nations feel the pinch of a super weak economy due to these cuts they will realize deflating their currency and losing pp is a much better option in the long a run as long as the economy is strong internally and can export some sort of market niche.
The US has it right and will win in the end. All these nations spent way too much for way too long and now the whole world is going to pay over the coming years. The whole wild card this summer will be if China has indeed turned off the tap. If GDP growth dips below 6% or less in China, which would be phenomenal anywhere else in the world. I would expect an all out massacre on the markets this fall.
So far Gold is very strong and its uptrend is intact. The breakout got sold down very quickly, but $1220 held. It's funny for gold right now, you can take the same pattern and read 2 different things, some would say triple top and others would say rising wedge pattern. I've been a Gold Bug since 2005 and its the one investment that never fails and keeps going up. Stay with it... because the best is yet to come with gold. $5000 5 years ago was ludicrous and some still say it is, but when gold is trading at $2500, people will then be predicting $5000.
Gold will be $1300 by September. :)
Happy Trading
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